CPSM Exam 3 (Leadership & Transformation) - TERMS

Theory of Constraints (TOC)

The ___ asserts that every entity in a system is a constraint, but only one can be defined as the critical constrained resource (CCR). All other entities or constraints are noncritically constrained resources (NCC R). The CCR controls the system. If an action reduces time at the CCR to less than the time at one of the NCCR, then that NCCR becomes the new CCR and controls the system. This is true for any process until absolute line balance is achieved. If and when line balance is achieved, one can think of the workstation/cell/process as a CCR or NCCR to the bigger system and repeat the analytical thought processes for the larger system.

Master Schedule

The ___ is a forward-looking plan for production or manufacturing. It includes a forecast over defined time periods (dates), plus customer orders, projected available balance, available-to-promise and the master production schedule. A r uses the forecast, production plan and other considerations such as backlog, availability of material, availability of capacity and management policies and goals to establish a ___

Production

The act or process of building or creating a product or service; manufacturing, mining or growing something for sale

Federal Acquisition Regulations (FAR)

The body of regulations used by all U.S. federal executive agencies in the acquisition of supplies and services with appropriated funds. The ___ are a compilation of all the laws and policies governing the federal procurement process.

Inventory Carrying Costs

The cost of keeping inventory on hand, including: the opportunity cost of invested funds (finance costs); storage and handling costs (overhead costs); and taxes, insurance (ownership costs), shrinkage, damage and obsolescence (risk costs). Organizations usually state an item's holding cost per time period as a percentage of the item's value.

Scheduling

Deciding in advance when work will be performed, where it will be performed, what kind of resources will be used and how much they will be used. The process is usually systems, policies, connected with techniques and/or devices.

Dependent Demand

Derived from or contingent upon the demand for another component or a finished product (e.g. the demand for axles used in the assembly of automobiles is dependent on the demand for the finished automobiles)

Demand Planning

The function of identifying demands for products and services to support the marketplace. encompasses the activities of forecasting, order planning and determining outside warehouse requirements, production balancing and spare parts.

Stock

The materials and supplies inventories kept in the storeroom/warehouse to satisfy the needs of the internal using departments or the external buyers

Finished Goods

Goods that have completed the manufacturing process and are ready for sale to external customers

Average Costing

In the context of inventory, this assigns an inventory value for an item at the average cost paid

Transportation

The movement of goods and passengers over distances

Demand

The need for a specific items in a specific quantity

Downstream

The path materials in the supply chain follow; e.g., raw materials move ___ to the manufacturer and, ultimately, the end customer

Production Scheduling

The process of developing a ___, usually at a detail level

Order Cost

The total cost of generating and processing an order and its related documentation

Accounts Payable (A/P)

The value of goods or services received from suppliers and other creditors for which invoices have been received but not yet paid by the buying organization. Also that branch of an organization which receives invoices and processes payments to suppliers and creditors.

American National Standards Institute (ANSI)

Umbrella organization that issues national standards based on consensus by all stakeholders organizations

Enterprise Resource Planning (ERP)

Usually refers to a particular type of computer software package that integrates various functions within an organization. It may be used to enable processes such as forecasting, materials management and purchasing

Commodity

"(1) Any tangible good that can be bought, sold or bartered, such as gold, silver, natural gas and oil or a bulk food product like grain, oats, corn, beef, pork bellies and coffee. Currently, the term includes investment vehicles such as ___ futures. A ___ is traded on a commodities exchange that facilitates the trade and establishes and enforces rules and regulations about the trading process. Depending on its use and trading purpose, a ___ may come in two types — cash ___ and spot ___. A cash ___ is an actual ___ that is under a futures contract. A ___ spot on the other hand, is one that is traded on a spot market, pending delivery; (2) In supply management, the term often refers to any good or service that is bought and sold in any trading arena.

Bottleneck

(1) A situation in which the capacity to accommodate products is less than what is needed to ensure smooth flow through the system; (2) In a Kraljic matrix or quadrant analysis, the quadrant represents items that are low-value and high-risk. Items in this category are generally purchased in large quantities and inventory levels are monitored closely to avoid interruptions in supply.

Sales

1. The dollar value of goods or services sold; 2. The function responsible for interacting with customers to do business; 3. Customer orders that have been placed within a given time period.

Demand Management

1. the proactive compilation of requirements' information regarding demand (i.e., customers, sales, marketing, finance) and the firm's capabilities from the supply side (i.e., supply, operations, and logistics management); 2. the development of a consensus regarding the ability to match the requirements and capabilities; and 3. the agreement upon a synthesized plan that can most effectively meet the customer requirements within the constraints imposed by supply chain capabilities

Kanban

A Japanese term meaning "signal." It is usually a printed card that contains specific information such as part name, description, quantity and so on that signals a cycle of replenishment for production and materials. It is an order release mechanism and one of the primary tools of a just-in-time (J IT) manufacturing system.

Certified Purchasing Manager (C.P.M.)

A certification of the Institute for Supply Management® (ISM ®) which is no longer available. Individuals holding the ___designation may apply for recertification every 5 years. Current designation holders who can document 18 years of applicable experience may apply for lifetime certification.

Variation

A change in data caused by one of four factors: special cause, common cause, tampering or structural ___.

Absolute Advantage

A competitive strength enjoyed by an entity (firm or country) that can produce a good or service at lower cost (fewer labor resources or hours of work) or with higher productivity (generates more output per hour of work) relative to another entity. It is able to produce more efficiently meaning that with equal inputs will have greater the entity with the output.

Stockout

A condition that occurs when items normally carried in stock are unavailable

Flow Manufacturing

A demand-based manufacturing strategy where items are pulled through a coordinated manufacturing process based on the ongoing monitoring of customer demand (i.e. product is made based on customer demand in daily schedules)

Bill of Materials (BOM or B/M)

A list containing the quantity and description of all materials required to produce one unit of a finished product. A ___ is an essential element in using a material requirements planning (MRP) system.

Standard Deviation

A measure of dispersion of data. ___ is calculated by finding the difference between the average and each actual observation, squaring each difference, summing all squared differences, dividing that total by n 1 (where n is the number of observations) and taking the square root of the result.

Lean Production

A philosophy of operation which focuses on minimization of all resources (including time) used in the enterprise. It employs a set of principles and practices to reduce cost through the relentless removal of waste and through the simplification of all processes.

Cycle Counting

A physical stock checking system in which the inventory is divided into groups which are physically counted at predetermined intervals, depending upon their ABC classification. Thus, the physical inventory counting goes on continuously without interrupting operations or storeroom activities. Also referred to as "continuous inventory."

Master Production Schedule (MPS)

A plan outlining the mix of end products to be produced during a given week

Forecast

A prediction based on quantitative (numeric) or qualitative (non-numeric) data. ___s attempts to predict future activities, such as demand, with sufficient accuracy to be the basis of planning

Forecasting

A process of making a prediction or estimation. For example, managers may predict or estimate future environmental conditions and their impact on the organization in terms of sales revenue, market share, supply availability and so on

Statement of Work (SOW)

A statement outlining the specific services a contractor is expected to perform, generally indicating the type, level and quality of service, as well as the time schedule required.

Material Requirement Planning (MRP)

A system used to determine the quantity and timing requirements of dependent demand materials used in a manufacturing operation. Materials can be purchased externally or produced in-house. The computer-based system utilizes a master production schedule, bill of materials and current inventory data to determine current new requirements and timing.

Distribution Resource Planning (DRP II)

A time-phased computerized inventory system to replenish inventory in multi-echelon warehousing systems. It includes planning for warehouse space, manpower requirements, transportation alternatives and financial flows.

Supplier Visit

A trip to inspect supplier facilities, meet supplier personnel and gather relevant information. A well-planned and executed ___ can be an invaluable learning experience and source of information.

CEO

Acronym for Chief Executive Officer

Safety Stock

Additional inventory held as a buffer against uncertainties in demand or in the supply system. Also called buffer inventory or buffer stock

80/20 Rule

Also known as the Pareto rule, it is the finding that a minority of a population account for the majority of a given effect. For example, in inventory management, 20% of the inventoried items account for 80% of the total dollars.

Vendor-Managed Inventory (VMI)

Inventory management system that holds a supplier responsible for ensuring that stock is maintained at appropriate levels in the purchaser's facility and for replenishing items when these levels drop. Sometimes referred to as ___ (___).

Supplier-Managed Inventory (SMI)

Inventory management system that holds a supplier responsible for ensuring that stock is maintained at appropriate levels in the purchaser's facility and for replenishing items when these levels drop. Sometimes referred to as vendor-managed inventory (VM l).

Storage

Media used for both the long- and short-term ___ of data including mass ___ devices, tape and discs

Economic Order Quantity (EOQ)

Model that can be used to determine the quantity of an item to be ordered or manufactured that minimizes total acquisition and inventory carrying costs. Although the EOQ concept can be used in a variety of applications, its most common use today is for independent demand items managed in an order-point inventory management system

Reorder Point

Predetermined inventory level that triggers an order. This level provides adequate inventory to meet anticipated demand during the time it takes to receive the order.

Capacity Requirements Planning (CRP)

Process of establishing, measuring and adjusting the levels of capacity in an organization within the context of manufacturing resource planning (MRP II)

Variability

Relationship between data sets and their relative clustering or dispersion within the sample or population. The smaller the ___the more tightly the numbers will cluster around a central value.

Internal Customer

An individual or organizational unit with whom purchasing has a working relationship and on whose behalf it obtains specified goods or services from external sources. As opposed to the more traditional term "user!' the term reflects an attitude of mutual respect, open and frequent exchange of questions, ideas and suggestions, and close cooperation in bringing value to the organization. May also be referred to as an internal business partner to reflect the equality of the supply management process with other core business processes and process owners.

Development Cost

An organization's expense for creating a new product or service

ABC Analysis

Application of Pareto's Law or the 80/20 rule to define three categories: A, B and C. is used to determine the relative ratios between the number of items and the dollar value of the items purchased repetitively for stock; the number of purchase orders and the dollar value; and the number of suppliers and percent of spend. In most organizations, 10-20% of the items ('A" items) account for 70-80% of the investment; the next 15-25% of the items items) account for 10-20% of the investment; and the remaining 65-75% of the items ("C" items) account for 5-10% of the investment. Inventories, purchases, and suppliers should be managed accordingly, with more emphasis placed on the strategic management of the "A" items and looser controls and less attention on "C" items.

Strategic Planning

Setting the long-term direction of an organization. To be successful, an organization must approach on three levels: (1) Corporate: Decisions and plans that answer the questions of "What business are we in?" and "How will we allocate our resources among these businesses?"; (2) Unit: These decisions mold the plans of a particular business unit, as necessary to contribute to the corporate strategy; (3) Function: These plans concern the "how" of each functional area's contribution to the business strategy and involve the allocation of internal resources.

Moving Average

a ___ calculates the average of the most current "n" periods. In each recalculation, the most current period's data is added and the oldest data is removed

Market Analysis

a comprehensive study of the feasibility or viability of a new concept or idea, usually undertaken before entry into the marketplace

Fixed Exchange Rates

a currency exchange rate set and maintained by a government

Recession

a decline of real GDP lasting for six months or more

Exponential Smoothing

a demand forecasting methodology that weights the demand for the most recent period and the forecast for the previous period as a basis for the current forecast

Electronic Catalog

a digital supplier document of its available products and services for sale. ___s can be created to specific parameters of the buying firm. Such catalogs are often used by individuals outside the supply organization to place orders. Also known as an e-catalog

Inflation

a loss of purchasing power, caused by increasing prices

Gross Domestic Product (GDP)

a measure of a nation's domestic output, which is the total value of all finished goods and services produced within the country during a specific time period (typically one calendar year)

Gross National Product (GNP)

a measure of a nation's total output, which is the total value of all finished goods and services produced anywhere in the world by its agencies and firms during a certain time period (typically one calendar year)

Lagging Indicator

a measure of economic activity that tends to change after the stat of the general economy has changed, for example the unemployment rate

Delphi Method

a method of forecasting where a panel of experts is polled repetitively in writing to develop a consensus prediction of future environmental conditions

Capacity Utilization Index

a monthly index issued by the U.S. Federal Reserve Board that calculates capacity utilization in the manufacturing, mining, and electric and gas utilities industries. This index represents the ratio of the industrial production index to plant and equipment capacity

Innovation

a newly introduced idea, system of thinking, method, product or process with attributes that do not currently exist

Monte Carlo Method

a numerical modeling procedure using random or sample data to discover solutions to problems

Return on Assets (ROA)

a profitability ration used to measure how hard the asset of an organization are working. ___ is calculated by dividing the net income by total assets

Index

a ratio, usually expressed as percentages, indicating average changes in values, quantities or prices. Typically, the changes are measured over time, each item being compared with a corresponding figure from some selected base period which is set as 100 (percent)

Follow-Up

a routine activity to monitor the status of a purchase order to ensure that specified service or product delivery schedules are met

Benchmark

a standard or point of reference used in measuring or judging an organization's performance according to selected criteria

Central Tendency

a statistical concept which defines the average of a distribution. Normally, measured by mean, median, or mode

Tariff

a tax imposed on imports or exports

Bond

a written instrument executed by a bidder or contractor (the principal) and a second party (the surety) to assure fulfillment of the principal's obligation to a third-party. Types of ___s include performance ___s, payment ___s and bid ___s

Purchase Requisition

a written or computerized request from an internal user/customer to purchasing for the procurement of goods or services from suppliers

xRP

acronym for "_____ requirements (or resource) planning" systems where the "x" may be materials, enterprise, manufacturing or distribution

SWOT

acronym for Strengths, Weaknesses, Opportunities and Threats; tool used in the strategic planning process

Tactical

actions undertaken to support the strategic and operational initiatives of an organization

Closed Economy

an economic system that has little or no external trade or does not permit economic transactions with the outside world

Wholesaler

business that sell to other businesses and not to the general public. Typically they sell products in large commercial quantities

Sales and Operations Planning (S&OP)

cross-functional process that works with internal business units to forecast anticipated demand, inventory, supply and customer lead times based on the sales forecast, actual demand, capacity forecast and the organization's business objectives

Objectives

general statements about expected outcomes. They are targets set my management to give an organization direction

Category

goods or services with similar characteristics or attributes that are grouped together for planning and management purposes and are bought and sold in any trading arena

Volume

in finance, the total number of shares, units or contracts traded in a security or market during a specified period of time

Mode of Transportation

means of transportation, including water, motor carrier, rail, air and pipeline

Correlation Analysis

method for measuring the statistical (not casual) relationship between two data series

Currency

money as defined by a given country, specifically paper money

Stakeholder

person(s) with a vested interest in something; those who will be affected by and/or can influence a decision-making process. At the corporate level, __s include management, employees, stockholders, customers, suppliers and so on who may gain or lose by a specific decision

Application Program Interface (API)

standardized protocols and data structures defined for each software or computer application that can be used to facilitate communication between software or computer applications

Supply and Demand

supply is the amount of goods or services available at a given price at any time. Demand is how many customers or consumers desire the goods or services that are in supply

North American Industry Classification System (NAICS)

system developed jointly by the U.S., Canada and Mexico to classify business activity across North America. ___ is expected to replace the U.S. Standard Industrial Classification (SIC) system

Tracking

the act of following the path along which something moves, such as a shipment from its departure to its destination. ___ capability is important for all modes of transportation

Point of Origin

the location where a transportation organization receives a shipment from the shipper

Supply Chain

the network of entities providing materials or services and transforming them into a product or service used by a consumer. There is no unique ___ that fits across all organizations and industries. Rather ___s will be designed to meet the needs of the organization

Dumping

the practice of selling a product in other countries at prices below those in its home market. Illegal in most importing countries, including the United States

Exchange Rate

the price of a currency as it is being exchanged for another

Capacity Forecast

the process of anticipating future capacity requirements

Economies of Scale

the reduction in average unit costs experienced as an organization's volume increases

Spreadsheet

usually computerized today, a ___ contains any number of cells of information that can be manipulated, and calculations can be performed automatically by the computer program in which it resides